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TMI Blog1987 (5) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration or other valuable consideration and includes- (i) a local authority, body corporate, company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business; (ii) ........................ (iii) ........................ (iv) a Government which, whether in the course of business or otherwise buys, sells, supplies or distributes goods, directly or otherwise for cash or for deferred payment or for commission, remuneration or other valuable consideration; (v) ........................ (vi) ........................" The word "business" has been defined in clause (aa) of section 2 as follows: "2. (aa) 'business', in relation to business of buying or selling goods, includes: (i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and (ii) ........................ but does not include any activity in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of such foodgrains and the tax shall accordingly be levied at that point on such dealer." An additional tax was also payable at the rate of five per cent over the turnover by the dealer whose yearly turnover exceeded rupees ten crores as provided under section 3-F of the U.P. Sales Tax Act, which now stands omitted by U.P. Act No. 4 of 1982 with effect from 7th September, 1981. Section 3-F as it existed is as follows: "3-F. Every dealer liable to pay tax under this Act, the aggregate of whose total turnover of purchases of goods notified under sub-section (1) of section 3-D, the turnover of sales liable to tax under sub-section (2) of section 3-D and of the total turnover of sales of all other goods, in any assessment year exceeds rupees two lakhs shall, in addition to the said tax, pay for that assessment year an additional tax at the rate of one per cent, of his turnover liable to tax: Provided that in the case of foodgrains, the rate of additional tax payable by any. dealer, the aggregate of whose turnover or turnover of purchases or both, as the case may be, liable to tax, exceeds rupees ten crores in an assessment year shall be five per cent. .............. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceased to perform any functions which under section 13 are functions of the corporation, the Central Government may transfer to the corporation any of the officers or employees serving in the office of the Central Government dealing with food or engaged in the performance of those functions. The primary duty of the corporation as provided under sub-section (1) of section 13 is to undertake the purchase, storage, movement, transport, distribution and sale of foodgrains and other food-stuffs. It can also undertake activities for promoting production of foodgrains and setting up of rice mills, etc., with the previous approval of the Central Government. Under section 26 of the Food Corporations Act, the Food Corporation of India is required to submit programme of its activities each year and the financial estimates to the Central Government for approval. Our attention has also been drawn to section 33 which provides that net annual profits earned by the Food Corporation of India shall be paid to the Central Government. Under section 34, the Food Corporation of India is required to maintain its annual statement of accounts including the profit and loss account and the balance-sheet in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redited to the Central Government. The activities of the corporation described above were being carried on by the Central Government prior to coming into existence of corporation and the staff of the Central Government connected with such activities was also transferred to the Food Corporation of India under the provisions of section 12(3) of the Food Corporations Act. In support of the fact that the procurement was being made for the national pool, reliance was placed on annexures 3 and 5 to the writ petition (No. 2077 of 1986). In annexure 3 which is a letter written by the Secretary to the State Government, Department of Institutional Finance to the Additional Secretary of the Government of India, Department of Food, it has been mentioned that the purchase of foodgrains by the Food Corporation of India was on behalf of the Central Government. Annexure 5 is again a letter by the Joint Secretary to the State Government mentioning therein that the State Government and its agencies had been purchasing the foodgrains for the national pool. These documents have been referred to establish the fact that the foodgrains purchased by the Food Corporation of India from the State Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of trade and commerce incidental in discharge of the governmental function is quite clear from the provision quoted above. Therefore, if some transactions take place in discharge of governmental functions, that cannot be called trade or business activity of the State liable to be taxed. Shri V. Upadhyay, learned counsel for the opposite parties, has submitted that the Food Corporation of India is neither a department of the Government nor does it perform any governmental function. Its activities are purely business and commercial activities. The question of earning profits is wholly immaterial. It has been submitted that the Food Corporation of India is only a company and it has to be so assessed under the Income-tax Act as provided under section 42 of the Act. The learned counsel for the opposite parties has taken us through the Statement of Objects and Reasons for enacting the Food Corporations Act, 1964. The Statement of Objects and Reasons reads as follows: "STATEMENT OF OBJECTS AND REASONS (1) It is considered desirable, in the interests of increased agricultural production as well as in the interests of the common consumer, to set up a State agency for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also been made to section 13 which relates to the functions of the corporation. In view of the above, it has been submitted that it is incorrect to say that the corporation is a service corporation. It has also been submitted that according to section 33 of the Act, the net profits earned by the corporation are to be credited to the Central Government. Therefore, it is incorrect to say that the activities are run on no profit no loss basis. In any case, it has been submitted that the profit making is not necessary for carrying on any trade or business so as to be liable to tax under the provisions of the U.P. Sales Tax Act. In this connection, a reference has also been made to clause (aa) of section 2 of the U.P. Sales Tax Act which defines "business" as any trade, commerce or manufacture, whether or not with a motive to make profit and whether or not any profit accrues on such trade, commerce or adventure. To repel the argument advanced on behalf of the petitioner that the Food Corporation of India is a department of the Government of India, the learned counsel for the opposite parties has placed reliance upon a case reported in AIR 1981 SC 1694 (State of Punjab v. Raja Ram), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not follow that we cannot harmonise the two functions. It is well on the agenda of State activity that it carries on trade or business in essential commodities because it has the power to do so and because it is obligated to ensure even distribution of vital goods for the needy sections of the people. We see no difficulty in inferring that the systematic activity of buying foodgrains and fertilisers and selling them by the State, although in fulfilment of a beneficent national policy is nevertheless trade or business. Necessarily, Government becomes a 'dealer' by definition and carries on 'business' within the meaning of the Central Act and the State Act (omitting for a moment the distinction in the two definitions based upon the motive to make gain or profit). The conclusion, therefore, is inevitable that the appellant, representing the Central Government, is rightly held to be the assessee." It may be mentioned here that under the U.P. Sales Tax Act also, the "dealer" includes a Government as well which in the course of business or otherwise, buys, sells or distributes goods directly or otherwise for cash or for deferred payment or for commission, remuneration or for other v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the activity is being carried on with a profit making motive or as to whether actually any profit do accrue or not. It cannot be said that the petitioner discharges governmental function. We may now consider the other limb of the argument that, in any case, the Food Corporation of India, in respect of national pool, can only be said to be a service corporation, which renders service to the people of the country on "no profit no loss" basis. The loss suffered by the Food Corporation of India is subsidised by the Central Government. The capital is also provided by the Central Government. The learned counsel for the petitioner has placed reliance upon a case reported in [1982] 51 STC 289 (Guj) (Mehsana District Shanker-4 Seeds Produce and Sale Co-operative Society Ltd. v. State of Gujarat). This is a Division Bench decision rendered by the Gujarat High Court. The Planning Commission of the Government of India recommended for forming agricultural co-operative societies of cotton growers for betterment of quality of cotton by distribution and multiplication of cotton seeds. In pursuance of the above scheme and object, the petitioner-society was registered. The society supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the millers or the farmers as the case may be for the purposes of national pool with the object of feeding the millions. It is for that purpose that the State Governments issue Procurement, Levy or Requisition Orders under the provisions of the Essential Commodities Act. The State Government acquires the foodgrains through different agencies, e.g., the U.P. Co-operative Federation, Essential Commodities Corporation, U.P. State Agro Corporation as well as through the Food Corporation of India in certain areas. After so acquiring the foodgrains it is made over to the petitioner by the State Government for the purposes of national pool. The contention is that such a transaction made in respect of foodgrains acquired under the Levy or Procurement Orders with one specific purpose as mentioned above does not amount to sale or purchase. In support of his contention that the transactions in question are in the nature of compulsory acquisition of property, the learned counsel for the petitioner has made a reference to entry 54 of List II of the Seventh Schedule to the Constitution which provides for taxes on the sale or purchase of goods other than newspapers subject to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orders issued by the State Government. Thus the transaction amounts to acquisition of property. In support of this contention, reliance has been placed on a case reported in [1970] 26 STC 344 (SC); AIR 1970 SC 2000 (Chittar Mal Narain Das v. Commissioner of Sales Tax). The case related to procurement of wheat under the U.P. Wheat Procurement (Levy) Order, 1959. Under clause 3 of the said Levy Order, it was provided that every licensed dealer had to sell to the State, at the control price, 50 per cent of wheat held by him in the stock at the time of commencement of the Order and 50 per cent of the wheat procured or purchased by him everyday. Clause 4 provided for power of the authorities to search or make seizure and to examine account books, etc. The relevant observations made by the Honourable Supreme Court are as follows: "The Order, it is true, makes no provision in respect of the place and manner of supply of wheat and payment of the controlled price. It contains a bald injunction to supply wheat of the specified quantity day after day, and enacts that in default of compliance the 'dealer is liable to be punished: it does not envisage any consensual arrangement. It does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners under the allotments made by the Sugar Controller of India to different States; it was observed that the despatches of sugar pursuant to the directions of the Controller were not made in pursuance of the contract for sale. There was no offer by the suppliers, nor any acceptance by the State of Madras. The suppliers had no volition in the matter. The transaction was held not to be sale so as to be exigible to tax under the Sales Tax Act. This was the view taken by the majority with Mr. justice Hidayatullah, as he then was, delivering a dissenting judgment. The Honourable Supreme Court thus found in the case of Chittar Mal [1970] 26 STC 344; AIR 1970 SC 2000 that the Order ignored the volition of the dealer and there was no contract between the dealer and the State; hence the transaction did not amount to sale and, therefore, not exigible to sales tax. The learned counsel for the petitioner referred to the definition of "sale" given under the Sale of Goods Act. It has been submitted that there has to be an agreement to sell before a sale takes place. There should be an offer and acceptance and unless the parties agree exercising their volition in the matter, there cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier decision of the Punjab High Court reported in [1976] 38 STC 144 (Food Corporation of India v. State of Punjab) and the decision in Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 anymore hold good. The Division Bench came to the conclusion that the Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 is not overruled to the extent it held that the levy transaction amounted to compulsory acquisition of property and not a sale. Shri V. Upadhyay, learned counsel appearing on behalf of the opposite parties, while refuting the submission made on behalf of the petitioner, submitted that the transactions under the Levy Orders amounted to "sale" and there was no compulsory acquisition of property. It has also been submitted that an area of consensual arrangement still remains there between the parties and the element of volition is not completely excluded under the Levy Orders. Thus the transaction amounted to sale. It has also been submitted that the decision in Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 stands practically overruled and is no more a good law in view of the latter decision, namely, Vishnu Agencies' case [1978] 42 STC 31 (SC); AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miting areas for transactions or parties or denoting price for transactions are all within the area of individual freedom of contract with limited choice." Their Lordships after considering the Control Order held that despite the fact that the parties were certain under the Control Order as to who had to sell and purchase the sugarcane, the price was fixed, the area was fixed, still it was found that there were areas in which the parties had freedom to agree on certain things. Thus the transactions taking place under the Control Orders were held to be "sale". The next case relied upon is [1976] 38 STC 435 (SC); AIR 1976 SC 2478 (Oil and Natural Gas Commission v. State of Bihar). The case of Salar Jung Sugar Mills Ltd. [1972] 29 STC 246 (SC); AIR 1972 SC 87 was followed in this case and it was held that supplies made to the Indian Oil Corporation by the Oil and Natural Gas Commission under the directions of the Central Government on a fixed price was "sale". Their Lordships of the Supreme Court observed that any sale under the Control Orders is not as a result of the coercion. The statute supplies the consensus and the modality of consensus is furnished by the statute. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 had been decided following the case of New India Sugar Mills' case [1963] 14 STC 316 (SC); AIR 1963 SC 1207, which in turn had followed the decision in Gannon Dunkerley's case [1958] 9 STC 353 (SC); AIR 1958 SC 560. According to the learned counsel for the opposite parties, Gannon Dunkerley's case [1958] 9 STC 353 (SC); AIR 1958 SC 560 was decided in a different context having no application to the case in hand and it had interpreted the definition of the word "sale" as provided under the Sale of Goods Act and Benjamin on Sale. The Supreme Court in Vishnu Agencies case [1978] 42 STC 31; AIR 1978 SC 449 has specifically overruled the view taken in New India Sugar Mills' case [1963] 14 STC 316 (SC); AIR 1963 SC 1207 and has approved the minority view as expressed by justice Hidayatullah, as he then was. We may, therefore, have to examine as to how far the decision in Chittar Mal's case [1970] 26 STC 344 (SC); AIR 1970 SC 2000 holds good and to what extent it has been overruled in Vishnu Agencies' case [1978] 42 STC 31 (SC); AIR 1978 SC 449. In Vishnu Agencies' case [1978] 42 STC 31 (SC); AIR 1978 SC 449, two appeals were con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the goods changed hands. In the first place, it is not obligatory on a trader to deal in cement nor on any one to acquire it. The primary fact, therefore, is that the decision of the trader to deal in an essential commodity is volitional. Such volition carries with it the willingness to trade in the commodity strictly on the terms of the Control Orders. The consumer too, who is under no legal compulsion to acquire or possess cement, decides as a matter of his volition to obtain it on the terms of the permit or the order of allotment issued in his favour. That brings the two parties together, one of whom is willing to supply the essential commodity and the other to receive it. When the allottee presents his permit to the dealer, he signifies his willingness to obtain the commodity from the dealer on the terms stated in the permit. His conduct reflects his consent. And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity. His conduct too reflects his consent. Thus, though both parties are bound to comply with the legal requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are constrained to say, namely, that the majority judgment in New India Sugar Mills [1963] 14 STC 316 (SC); AIR 1963 SC 1207 is not good law. Bachawat, J., preferred to adopt the not unfamiliar manner of confining the majority decision to 'the special facts of that case'." About the decision in Gannon Dunkerley's case [1958] 9 STC 353 (SC) AIR 1958 SC 560, which was followed in New India Sugar Mills case [1963] 14 STC 316 (SC); AIR 1963 SC 1207, their Lordships observed in para 40 of the judgment that the decision in Gannon Dunkerley's case [1958] 9 STC 353 (SC); AIR 1958 SC 560 was in a different context and the enquiry was only to a limited extent as to whether the material used by a building contractor during the course of execution of the contract amounted to sale. It was held that it did not amount to sale in the context of the definition of the word "sale" under the Sale of Goods Act and since the ingredients of the "sale" were not present as laid down in Benjamin on Sale, therefore, no tax could be levied on such material. The reasons given in Gannon Dunkerley's case [1958] 9 STC 353 (SC); AIR 1958 SC 560 for holding that the using of material did not amount to "sale" has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larified." Their Lordships of the Honourable Supreme Court have thereafter observed that a more relevant decision on the point would be [1962] Ch 376 (Ridge Nominees Ltd. v. Inland Revenue Commissioners). In that case, under certain circumstances, the transfer of shares had to be executed under the statutory provisions even against the consent of one of the parties. The question was whether a transfer of shares under such circumstances was required to be stamped as a transfer on sale. The question, therefore, was whether the transaction amounted to sale even though element of mutual consent was totally absent. It was observed by Lord Evershed, M.R., that what the Companies Act had done, by the machinery it had created, was that in truth it brought into being a transaction which had apparently all characteristics of transfer on sale. While concurring with the decision Donovan, L.J., observed that the dissent of the shareholder was overridden by an assent which the statute imposed upon him though it may be fictional. Danckwerts, L.J., also concurring with the judgment observed that a sale may not always require the consensual element and that there may be a compulsory sale of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court's interpretation of clause 3 in no uncertain terms by saying that 'it did not envisage any consensual arrangement'." (Emphasis* supplied) From the above observations, what emerges out is that, no doubt, cases of compulsory acquisition of property stand on different footings but in those transactions where there is some area of consensual arrangement and some field for volition is left untouched by the legislation, the transactions will take the colour of sale. The criticism of the Full Bench decision of this Court ([1969] 24 STC 508; AIR 1970 All. 518: Commissioner of Sales Tax, U.P. v. Ram Bilas Ram Gopal) in the case of Chittar Mal *Here italicised. [1970] 26 STC 344 (SC); AIR 1970 SC 2000 has not been approved by the Honourable Supreme Court in Vishnu Agencies' case [1978] 42 STC 31 AIR 1978 SC 449. In other words, the view taken in the Full Bench decision of this Court was approved where it was held that the sale made by a dealer to the Regional Food Controller under the U.P. Wheat Procurement (Levy) Order, 1959 amounted to sale and exigible to sales tax. It was held that a sale under the compulsion of a statute is still a sale. Whatever coercive force is used to br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the State Government in the circumstances mentioned above. A reply to the said averment has been made in para 12(e) of the rejoinder affidavit on behalf of the petitioner through Sri S.R. Singh wherein it has been stated that the Food Corporation of India rejects and does not accept the foodgrains which are not in accordance with the specifications fixed by the Government of India. So far rejection of 142 metric tonnes of wheat is concerned, it has been said that the quantity was just a drop in the ocean. However, it appears that on the second thought the petitioner tried to explain this matter in its supplementary affidavit dated 20th May, 1986 sworn by Sri S.R. Singh. In this supplementary affidavit it has been stated that the opposite parties did not aver in the counter-affidavit that 142 metric tonnes of wheat pertained to levy transaction, and in respect of non-lifting of 47 metric tonnes of rice it has been stated that it was advance levy which was taken by the State Government; therefore, it was not lifted. However, it has been accepted in para 4 that the Food Corporation of India is bound to accept the levy foodgrains provided they are of the prescribed specifications. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the position in the present case. The question of mode of payment of price was also taken into account in the abovementioned Full Bench decision in Ram Bilas Ram Gopal [1969] 24 STC 508 (All.); AIR 1970 All. 518; 1969 ALJ 424. Therefore, it cannot be said that the area of consensual arrangement is absolutely excluded in the levy transactions. It has next been vehemently urged that the millers are required to part with a certain percentage of their stocks irrespective of the fact that whether the foodgrains belong to the millers or not. The stock of miller may include such stock of foodgrains which may have been handed over by the farmers or other persons for hulling. This, according to the learned counsel for the petitioner, is one of the strong ingredients to establish that the transaction amounts to acquisition of property, otherwise ordinarily a person can sell only the property in which he has his right and title. The argument at the first sight appears to be fascinating but we find that it is devoid of any merit. As a matter of fact, the Levy Orders prescribe a mode of taking delivery of foodgrains through the millers even though goods may not belong to them. It is only tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." Learned counsel for the opposite parties has placed before us the Statement of Objects and Reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when the purchaser exercises the option to purchase at a much later date and therefore only the depreciated value of the goods involved in such transaction at the time the option to purchase is exercised becomes assessable to sales tax. Similarly, while sale by a registered club or other association of persons (the club or association of persons having corporate status) to its members is taxable, sales by an unincorporated club or association of persons to its members is not taxable as such club or association, in law, has no separate existence from that of the members. In the Associated Hotels of India case [1972] 29 STC 474; AIR 1972 SC 1131, the Supreme Court held that there is no sale involved in the supply of food or drink by a hotelier to a person lodged in the hotel. 4.. In the New India Sugar Mills case [1963] 14 STC 316; AIR 1963 SC 1207, the Supreme Court took the view that in the transfer of controlled commodities in pursuance of a direction under a Control Order, the element of volition by the seller, or mutual assent, is absent And, therefore, there is no sale as defined in the Sale of Goods Act, 1930. However, in Oil and Natural Gas Commission v. State of Biha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 42 STC 386; AIR 1978 SC 1591. States have been proceeding on the basis that the Associated Hotels of India case [1972] 29 STC 474 (SC) was applicable only to supply of food or drink by a hotelier to a person lodged in the hotel and that tax was leviable on the sale of food-stuffs by a restaurant. But overruling the decision of the Delhi High Court, the Supreme Court has held in the above case that service of meals whether in a hotel or restaurant does not constitute a sale of food for the purpose of levy of sales tax but must be regarded as the rendering of a service in the satisfaction of a human need or ministering to the bodily want of human beings. It would not make any difference whether the visitor to the restaurant is charged for the meal as a whole or according to each dish separately. 9.. It is, therefore, proposed to suitably amend the Constitution to include in article 366 a definition of 'tax on the sale or purchase of goods' by inserting a new clause (29A). The definition would specifically include within the scope of that expression tax on- (i) transfer for consideration of controlled commodities; (ii) the transfer of property in goods involved in the executio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Northern India Caterers (India) Limited case [1978] 42 STC 386 (SC) and the commencement of the present Amendment Act. 14.. The Bill seeks to achieve the above objects." Clause 6 of the Amendment Act has also been referred to, which is a validation and exemption clause. Clause 6 reads as follows: "6. Validation and exemption.-(1) For the purposes of every provision of the Constitution in which the expression 'tax on the sale or purchase of goods' occurs, and for the purposes of any law passed or made, or purporting to have been passed or made, before the commencement of this Act, in pursuance of any such provision,- (a) the said expression shall be deemed to include, and shall be deemed always to have included, a tax (hereafter in this section referred to as the aforesaid tax) on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) for cash, deferred payment or other valuable consideration; and (b) every transaction by way of supply of the nature referred to in clause (a) made before such commencement shall be deemed to be, and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in clause (a) or, as the case may be, clause (b), shall be on the person claiming the exemption under this sub-section. (3) For the removal of doubts, it is hereby declared that,- (a) nothing in sub-section (1) shall be construed as preventing any person- (i) from questioning in accordance with the provisions of any law referred to in that sub-section, the assessment, reassessment, levy or collection of the aforesaid tax, or (ii) from claiming refund of the aforesaid tax paid by him in excess of the amount due from him under any such law; and (b) no act or omission on the part of any person, before the commencement of this Act, shall be punishable as an offence which would not have been so punishable if this Act had not come into force." The U.P. Sales Tax Act was also similarly amended by Act No. 25 of 1985. By means of this amendment, clause (h) of section 2 of the U.P. Sales Tax Act has been substituted as follows: "(h) 'sale', with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, varying or revising the order previously made, as may be necessary to give effect to the provisions of this Act. (3) The assessing, appellate or revising authority, as the case may be, may, within a period of one year from the commencement of this section or within the period specified in section 22 of the principal Act, whichever expires later, make any rectification in any order passed by it where such rectification becomes necessary in consequence of the amendment of the principal Act by this Act: Provided that no rectification, which has the effect of enhancing the assessment, penalty or other dues, shall be made unless the authority concerned has given notice to the dealer or the person concerned of his intention to do so and has allowed him a reasonable opportunity of being heard." On the basis of amendments in the Constitution and the U.P. Sales Tax Act referred to above, it has been submitted on behalf of the opposite parties that the transactions which take place under the Levy Orders are fully covered as sales under sub-clause (a) of clause (29A) of article 366 of the Constitution and under clause (h) of section 2 of the U.P. Sales Tax Act. Transfer of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the transfer of property in goods does take place in the transactions under the Levy Orders for price. Whatever controversy existed earlier about such transactions, it has come to an end. Learned counsel for the petitioner has submitted, no doubt that the validity of the amended provision has not been challenged but still the transactions under the Levy Orders would not be covered under the amended definition of the word "sale". He has again emphasised that the transaction under the Levy Order amounts to acquisition of property and not sale. It has been submitted that the compulsory acquisition and the sale are undisputedly two different concepts and connote different kinds of transactions. It has also been pointed out that these two different terms have been differently used in the Constitution under entry 54 of List II of the Seventh Schedule and entry 42 of List III of the Seventh Schedule. We have already made a reference to those entries in the earlier part of this judgment. Then reliance has been placed upon the observation made by the Honourable Supreme Court in Vishnu Agencies' case [1978] 42 STC 31; AIR 1978 SC 449 wherein it has been observed that the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term takes colour from specific term used. In this connection, he has cited a case reported in AIR 1973 SC 1293 (S.P. Watel v. State of U.P.) and has also referred to the Legislation and Interpretation by Jagdish Swaroop, page 117, 1974 Edition. Reliance has also been placed on AIR 1957 SC 18 (Ram Narain v. State of Uttar Pradesh). There is no dispute with the proposition that a word has to be given meaning keeping in view the context in which it is used and the company of other words which it keeps. But in our view, the question of searching such meaning arises when there is vagueness in the meaning of the word to be interpreted or there is some doubt about the same and it may not be possible to have the plain meaning on the bare reading of the provision. We find no such ambiguity in this case. The inclusive definition has been provided for the word "sale " and there seems to be no difficulty in holding that where property in goods is transferred even though without in pursuance of a contract, for a price or consideration that would be "sale". It has then been submitted that while making the amendment, the legislature did not have in its mind the levy transactions. In different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on the ground that there was no sale when food or drink is supplied to a guest staying in a hotel as held in [1978] 42 STC 386 (SC); AIR 1978 SC 1591 [Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi]. However, such a supply made to the guest was included as "sale" by an amendment in article 366 of the Constitution and U.P. Act No. 25 of 1985. In this case it was also considered whether such amendment could retrospectively be made or not. The Division Bench of this Court upheld the validity of amending Act No. 25 of 1985 as well as upheld the retrospectivity of the amended provision. A reference was also made to an unreported decision of this Court by Honourable Mr. justice N.D. Ojha, as he then was, in Sales Tax Revision No. 171 of 1983 and Sales Tax Revision No. 184 of 1983 (Commissioner, Sales Tax, U.P. v. Rajpur Brothers), decided on 25th April, 1984. It appears that certain restaurant owners had challenged the levy of sales tax on items supplied to the customers, e.g., sweets, tea, poori, etc., on the strength of decision in Northern India Caterers' case [1978] 42 STC 386 (SC); AIR 1978 SC 1591. It appears that when these revisions were decided, the Forty-six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Sales Tax Act has also been challenged. Before reproducing explanation II to section 3-D(1), it would be appropriate to refer to section 3 which is the taxing provision and section 3-D(1). Section 3 reads as follows: "Section 3. Liability to tax under the Act.-(1) Subject to the provisions of this Act, every dealer shall, for each assessment year, pay a tax at the rates provided by or under section 3-A, or section 3-D on his turnover of sales or purchases or both, as the case may be, which shall be determined in such manner as may be prescribed. (2) No dealer shall, except as otherwise provided in section 18, be liable to tax under sub-section (1) if, during the assessment year, the aggregate of his turnover of- (a) purchases of goods notified under section 3-D; (b) purchases liable to tax under any other provision of this Act; (c) sale of goods notified under section 3-D where such goods have not been purchased within the State; (d) sales of all goods (except those notified under section 3-D), whether such sale is made by the dealer directly or through his branch, depot or agent inside the State, in the course of inter-State trade or commerce or outside the State, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of such goods by the dealer who sells the goods or through whom the goods are sold to such purchaser; and the rate of tax shall be the same as notified under sub-section (1). (3) ............................ (4) ............................ (5) ............................ (6) ............................ (7) ............................ (8) ............................" It may be mentioned here that explanation II was added by U.P. Act No. 23 of 1976 with retrospective effect. Under clause (b) of sub-section (1) of section 3-D of the Sales Tax Act, the liability of tax is fastened upon the first purchaser. However, in the case of purchase of foodgrains in pursuance of any order under section 3 of the Essential Commodities Act, 1955, a purchase made by a dealer from the State Government is to be considered as first purchase of such foodgrains including the quantity which may be purchased in excess of levy share. The result of the above explanation II is that although the foodgrains are actually first purchased by the procuring agencies or the State under the Levy Orders issued under section 3 of the Essential Commodities Act from the growers, farmers, millers or st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, we do not find any force in the submission made on behalf of the petitioner that-there is any discrimination. We also cannot hold that explanation II was added only with a view to single out the petitioner for taxation. In para 13 of the counteraffidavit, filed on behalf of the opposite parties, it has been averred that in the year 1981-82, the Food Commissioner of U.P. had sold levy rice to the Essential Commodities Corporation, U.P. and for that the said corporation was assessed to purchase tax under section 3-D(1), explanation II of the Sales Tax Act. This is an example which clearly shows that the Food Corporation of India is not the only dealer who alone could purchase from the State Government, other dealers may also purchase from the State Government. The assertion of singling out of the petitioner is thus not made out. Therefore, the question of discrimination does not arise. The other ground of attack is, as to why a particular commodity, viz., the foodgrain, procured under the Levy Orders under the Essential Commodities Act, has been chosen for the purposes of first purchase under explanation II and why not other commodities have been chosen, e.g., nonlevy food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed. If the purchase of levy foodgrains is taxed at any earlier point, then too, the burden will ultimately pass on to the consumers alone. We, therefore, find no force in this contention too. Non-levy foodgrain or other commodities do not get any exemption from taxation because of explanation II. Learned counsel for the opposite parties has also placed reliance upon the case reported in [1962] 13 STC 529 (SC); [1963] 1 SCR 404 (East India Tobacco Company v. State of Andhra Pradesh). It has been observed by the 'Honourable Supreme Court that the State has wide discretion in selecting a person or objects it would tax and the taxing statute will not be open to attack on the mere ground that it taxes some person or objects and not others, but when within the range of its selection, the law operates unequally then certainly article 14 of the Constitution may be said to be violated. Nothing has been shown to indicate that any discrimination has been made between one purchaser and the other in regard to purchases of levy foodgrains made from the State Government. Reliance has also been placed upon a case reported in [1973] 31 STC 178 (SC); [1973] 1 SCC 216; AIR 1973 SC 1034 (Hira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer, the aggregate of whose turnover or turnover of purchases or both, as the case may be, liable to tax, exceeds rupees ten crores in an assessment year, shall be five per cent." The validity of this provision has been challenged on the ground that the amendment was aimed against the Food Corporation of India alone. According to the learned counsel for the petitioner, there were no other dealers dealing in foodgrains except the Food Corporation of India, whose turnover exceeds rupees ten crores. It has further been submitted that the State Government considers the Food Corporation of India as milching cow and it was for that purpose that two provisions were added by Act No. 23 of 1976, namely, explanation II to section 3-D(1) and section 3-F of the Sales Tax Act. It has been submitted that a reading of these provisions together would leave no room for doubt that the amendments have been made only with a view to single out the petitioner. While dealing with this point in the context with explanation II to section 3-D(1) we have already found that the above contention raised on behalf of the petitioner is not sustainable, rather the indications are otherwise, namely, it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortance. According to the learned counsel, the intention of the State was to tax the maximum amount from the Food Corporation of India. In reply to the said submission, the learned counsel for the opposite parties has submitted that no such plea of mala fide is permissible so far it relates to the field of legislation. He has on this point placed reliance upon a case reported in AIR 1985 SC 551 (K. Nagaraj v. State of Andhra Pradesh). We are, therefore, of the view that no motive could be imputed in adding section 3-F by amending Act No. 23 of 1976. So far the question of retrospective amendment is concerned, learned counsel for the opposite parties has placed reliance upon the following cases: AIR 1954 SC 158 (Union of India v. Madan Gopal Kabra), [1961] 12 STC 429 (SC); AIR 1961 SC 1534 (J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh), [1964] 15 STC 461 (SC); AIR 1964 SC 1581 (Epari C. Krishna Moorthy v. State of Orissa), [1973] 31 STC 178 (SC); AIR 1973 SC 1034 (Hira Lal Rattan Lal v. Sales Tax Officer, Kanpur). On the basis of the above decisions it has been submitted that the legislature is quite competent to impose tax with retrospective effect. Nothing has been sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to bear the burden of additional tax. On the basis of the above observation, it was submitted that one of the relevant considerations would be the capacity of the dealer to bear the burden of additional tax. However, in the case of the petitioner it has been submitted that the Food Corporation of India has already incurred loss in relation to levy transactions which have been subsidised by the Central Government from time to time. It has been submitted that higher turnover in the case of the petitioner does not indicate the economic superiority of the petitioner nor its capacity to bear the burden of additional tax. The result of the imposition of additional tax would be that even the capital of the petitioner would be eaten up in payment of additional tax. That is to say, the imposition of additional tax is confiscatory in nature. In this connection, reliance has also been placed upon a case reported in [1985] 58 STC 12 (SC); AIR 1985 SC 12 (K.M. Mohamed Abdul Khader Firm v. State of Tamil Nadu). We are afraid it will not be possible for us to accept the contention raised on behalf of the petitioner, firstly because no foundation on facts has been laid in the petitions or in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxation was confiscatory in nature. It was also held that inequality had resulted because of lack of classification for the purposes of taxation. But we find that in the present case for the purposes of levy of surcharge, a classification has been made and only those whose turnover is more than rupees ten crores in one assessment year, are made liable for surcharge at the rate of 5 per cent. It cannot be said that there is absolute lack of classification, nor it can be suggested that some more slabs should have been provided for the purposes of taxation. It is entirely within the competence and jurisdiction of the State to have its policy in regard to imposition of tax. Unless it is shown that the provision is such that it would result in inequality, it cannot be struck down merely on the ground that tax can be imposed in a better manner or in some more equitable manner. In this connection, it would be useful to refer to the observations made by the Honourable Supreme Court in the abovenoted case of Kunnathat Thathunni Moopil Nair AIR 1961 SC 552: "A taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in article 14, though the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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